Managing Debt and Financial Goals

There is debt and then there is bad debt. Borrowing money to purchase a home or to pay for college can enrich the quality of your life and benefit you financially and personally for many years to come. But credit card debt or personal loans with high interest can crush you financially and prevent you from accomplishing many other goals you have for yourself. Falling behind on credit card payments can create a domino effect with all your monthly bills falling behind. This can lower your credit score and adversely impact your ability to obtain the loans you need to improve your life and advance your career, according to the Federal Trade Commission.

Your Credit Score

Many people do not fully understand how their credit score is determined or that they can improve their existing score. If your score is below 620, there are many steps you can take to prevent it from falling further and to improve your chance of qualifying for the best possible interest rates when you apply for a loan.

--Pay all your bills on time. Once you get in the habit of paying bills on time or before they are due, you are one step ahead of the vast majority of Americans struggling with debt. 

--Keep credit card debt low. Being maxed out on your available credit can lower your FICO score by as much as 70 points.

--Keep some credit cards, but only the ones you need. A lot of available credit tends to lower your score. However, a person with no credit cards is also considered more of a credit risk than a person who manages a small number of credit cards responsibly.

--Simply closing an account does not remove it from your credit report. A debt relief counselor can help you review your current credit score and develop a long term strategy to get back in control of your finances.

Control Your Spending

Most people acquire monthly payments and subscriptions without giving them much thought. The monthly amount seems small on its own, but a few unneeded recurring monthly payments add up quickly and will place a strain on your income.

Write down all of your recurring monthly expenses and start cutting back on the things you do not really need to have. Sometimes your cable, Internet service or cell phone service provider will reduce your monthly bill just to keep you as a customer. Consider cutting the cord on cable and your home land-line phone. You can use the extra money to pay down your existing debt and save for more rewarding expenditures.

Be Prepared for Emergencies

Have enough money in the bank for at least four to six months of living expenses. If you are not prepared, things such as a new HVAC system or major automobile repair bill can completely derail your financial plan. It is during these times of financial crisis that many people run up high credit card balances or fall behind on monthly bills.

If you feel you have more debt than you can manage on your own, there are reputable credit counseling services to help you. The faster you get help, the sooner you will be back in control of your finances and your life.